Graham-Style Screening and Risk Controls for Chinese Equities

Summary

This article presents a quantitative interpretation of Benjamin Graham’s enterprise-owner investment approach and a version adjusted for Chinese stocks. The original criteria focus on liquidity relative to current liabilities, limits on debt, a history of positive earnings, cash dividends, earnings growth, and price relative to tangible asset value. The adapted screen uses positive and low price-to-earnings ratios, a price-to-book limit, working-capital and borrowing tests, positive net income, recent cash dividends, and earnings growth. It selects 30 stocks and rebalances monthly.

The strategy also describes selling a stock after it falls 7% below its purchase cost and exiting all holdings if the broad market drops 13% within five days. A backtest from January 2014 to June 2017 reports annualized strategy and benchmark returns, maximum drawdown, win rate, and average holdings. These results are historical and do not prove the approach will work in other periods. The article provides limited information about costs, execution assumptions, universe construction, or robustness testing.

Key ideas

• Graham’s framework screens for financial strength, consistent earnings, dividends, growth, and reasonable asset-based valuation.
• The China-focused adaptation combines valuation filters with balance-sheet and earnings criteria.
• The described portfolio contains 30 stocks and is rebalanced monthly.
• The method includes stock-level loss limits and a market-wide exit condition.
• The reported backtest is historical evidence with limited detail on costs and robustness.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.